At Deal Journal, Shira Ovide writes that:
... we tracked down Alan J. Ziobrowski, a professor at George State University’s business school who co-wrote a 2004 study that found U.S. senators’ stock picks beat the market by an average of about 12 percentage points a year during a stretch of the 1990s. Over the same period, U.S. households underperformed the market by 1.4 percentage points a year on average.
The study’s authors suggested the performance was so good, senators likely benefitted from access to inside information, such as when a company was going to be awarded a government contract, or that a pharmaceutical treatment was about to be rejected by the FDA.
Since his study, which drew wide press attention, Ziobrowski said he has heard from other researchers that the trading performance of members of Congress no longer is wildly better than the public’s stock record. He said it may be a sign that the 2004 study scared straight some Capitol Hill types.
“I’m very proud of that for that reason alone,” Ziobrowski said. “No one went to jail, but that’s ok. It was well worth doing the paper.”
I wonder if the result could also be explained by the stock market decline in the latter part of the decade? It seems likely that members of Congress might have better access to positive information than negative information, which means they might do better in an up market than a down one. But that's just speculation. Anyway, it's interesting in light of my article, Insider Trading Inside the Beltway, which used the 2004 study as a jumping off point for its analysis of the legal issues. The legal analysis remains relevant, of course, even if Congress has been scared straight for now.
